managerial accounting is designed to meet the specific needs of a company's management, this information includes the following:
1)historical data- provides OBJECTIVE measures of past operations 2)Estimated data- provides SUBJECTIVE estimates about future decisions. use both types of information to plan daily operations, future operations and to develop business strategies.
managerial accounting reports do Not have to be
1) prepared according to GAAP 2)Prepared at fixed intervals- made when management needs the information 3) Prepared for business as a whole- management reports are prepared segments of the company.
shows the operating structure of a company.
departments either have:
1)line responsibilities or 2)staff responsibilities
a line department...
is directly involved in providing goods or services to the customers of the company. They are responsible for manufacturing and selling products.
a staff department...
provides services,assistance, and advice to the departments with line or staff responsibilities- has no direct authority over line department.
in most companies controller is the chief management accountant
controller's staff have specialized accounting functions:
1)systems and procedures 2) general accounting 3)budgets and budget analysis 4)Special reports and analysis 5)taxes 6)cost accounting
management process has 5 basic phases:
1)Planning 2)Directing 3)Controlling 4) Improving 5) Decision Making
management uses planning in developing the company's objectives(goals) and translating objectives into courses of action planning types: 1)strategic: developing long term actions to achieve objectives, over 5-10 years- called strategies 2) operational planning: develops short-term actions for managing the day-to-day operations of the company
process by which managers run day-to-day operations.
monitoring operating results and comparing actual results with the expected results. This feedback allows management to isolate problem areas, investigate and remediate. Process of controlling by comparing actual and expected results is called management by exception.
feedback is used to support continuous process improvement- the philosophy of continually improving employees, business processes, and products. Objective is to eliminate source of problems in the process.
5) Decision Making
companies must constantly decide among alternative actions.
payment of cash or commitment to pay cash in the future for the purpose of generating revenues.
in managerial accounting, the costs are classified by their relationship to a segment of operations. May be a product, a sales territory, a department, or an activity
are identified with and can be traced to a cost-object. ex: materials
cannot be identified with or traced to a cost object. ex: salaries of production supervisors
depending on the cost object a cost may either be direct of indirect-
example: cost object: guitar. salaries of production supervisors=indirect. cost object:overall production process. salaries of production supervisors=direct.
Direct Materials Cost
the cost of any material that is an integral part of the finished product. A manufacturing cost. to be classified as a direct materials cost, must be BOTH: 1) an integral part of the finished product 2) a significant portion of the total cost of the product.
direct labor costs
a direct labor cost must be both of the following: 1) An integral part of the finished product 2)A significant portion of the total cost of the product
factory overhead cost
costs other than direct materials cost or direct labor costs that are incurred in the manufacturing process are combined and classified as factory overhead costs. AKA manufacturing overhead or factory burden.
direct materials and direct labor costs
direct labor and factory overhead costs
consist of manufacturing costs: direct materials, direct labor and overhead costs
consist of selling and administrative expenses
incurred in marketing the product and delivering the product to custoners
incurred in managing the company and are not directly related to the manufacturing or selling functions.
consists of the costs of the direct and indirect materials that have not entered the manufacturing process
work in process inventory
consists of the direct materials, direct labor, and factory overhead costs for products that have entered into the manufacturing process but are not yet completed.
finished goods inventory
consists of completed(or finished) products that have not been sold.
cost of goods manufactured is prepared in 3 steps:
1)determine cost of materials used 2) determine the total manufacturing costs incurred 3) determine the cost of goods manufactured